2023 (3) TMI 126 - AT - Central Excise

CENVAT Credit - after sale service provided during warranty period of the sale of the goods manufactured by the respondent - service provided during warranty period is after removal of the goods from the factory is provided in or in relation to the manufacture of excisable goods or not - HELD THAT - The service on which the respondent have taken the cenvat credit is provided in the nature of Repair Maintenance of the excisable goods i.e. pumps sold by the respondent during the warranty period. It is also observed that the policy of free servicing during warranty period is not under dispute. The respondent is not collecting the service charges from the customer which is the service during the warranty period is provided free of cost therefore, the cost of such service stand included in the transaction value of the excisable goods sold by the respondent. Rule 2(l) particularly in the inclusion clause covers the activities relating to business therefore, the said service during warranty period also clearly falls under the category of activities relating to business . This identical issue has been considered by this tribunal in the case of Leroy Somer India Pvt. Ltd 2015 (10) TMI 1025 - CESTAT NEW DELHI wherein, the tribunal has held that appellant is entitled to take Cenvat credit on repairs and maintenance provided by services provider during the period of warranty on behalf of the appellant. Thus, the respondent are entitle for the cenvat credit on the service of Repair Maintenance during warranty period accordingly, the impugned order is upheld - Revenue s appeal is dismissed.

Summary

Issues:
Whether the appellant is entitled to cenvat credit for after-sale service provided during the warranty period of goods manufactured by the respondent.

Analysis:
The Assistant Commissioner for the revenue argues that the service provided during the warranty period, after the removal of goods from the factory, does not qualify for cenvat credit as it is not provided in or in relation to the manufacture of excisable goods. He relies on Rule 2(l) to support his argument that only services provided up to the place of removal are cenvatable, whereas in this case, the after-sales service was provided after the removal and sale of the pumps, making cenvat credit inadmissible.

On the other hand, the respondent's counsel contends that the after-sale service during the warranty period falls under the term 'in or in relation to the manufacture of excisable goods.' He emphasizes that the value of such service was included in the transaction value of the pumps sold by the respondent, on which excise duty was discharged. The counsel argues that the service was used in or in relation to the manufacture of the final product and falls under the inclusion clause of service related to business activity, making the respondent eligible for cenvat credit.

The Tribunal, after considering both arguments and examining the records, finds that the service for which the respondent claimed cenvat credit is in the nature of Repair & Maintenance of excisable goods, specifically pumps sold during the warranty period. It notes that the policy of free servicing during the warranty period is undisputed, and the respondent does not charge customers for this service, indicating that the cost of such service is included in the transaction value of the excisable goods. Consequently, the Tribunal concludes that the servicing during the warranty period is directly related to the manufacture of the final product and is a crucial part of the respondent's business activity.

Moreover, Rule 2(l), particularly the inclusion clause covering 'activities relating to business,' also encompasses the service provided during the warranty period. The Tribunal cites a previous judgment involving a similar issue where it was held that the appellant was entitled to take cenvat credit on repairs and maintenance services provided during the warranty period, as these services were essential for the business and covered by the Cenvat Credit Rules.

Based on the discussions and the precedent cited, the Tribunal rules in favor of the respondent, stating that they are entitled to cenvat credit for the Repair & Maintenance service during the warranty period. Consequently, the impugned order is upheld, and the revenue's appeal is dismissed, with the case being disposed of accordingly.